Japan quake strains supply chain from chips to ships
SAN FRANCISCO/SEOUL (Reuters) - Automakers, shipbuilders and technology companies worldwide scrambled for supplies after the disaster in Japan shut down factories there and disrupted the global manufacturing chain.
Technology companies were particularly hit since Japan accounts for one-fifth of the world's semiconductor production, including about 40 percent of flash memory chips used in everything from smartphones, tablets to computers.
Multinationals that buy parts from Japan or have plants located there were grappling with power blackouts, factory closures and transportation problems after roads, railways and ports in north east Japan were destroyed by Friday's devastating earthquake and tsunami.
Toyota Corp was hard hit as many of its plants were near the epicenter of the 8.9 earthquake, and Sony Corp has suspended production.
Texas Instruments said it would take until July to return to full production. TI spokeswoman Kim Morgan told Reuters two of its plants making wafers and DLP chips for projectors were still suspended due to power problems.
Intel Corp was managing better. It buys silicon wafers used for chip manufacturing from Japan and said it often relies on flights to transport goods and was confident it could manage the disruption.
"The supply chain looks, given the circumstances, pretty good. Right now the main issue is trying to sort through the issues associated with moving materials within Japan," Intel spokesman Chuck Mulloy told Reuters.
ON Semiconductor said unreliable power supplies kept one its six factories off line.
These disruptions pushed shares down worldwide in the semiconductor industry. The Thomson Reuters G7 Semiconductor & Semiconductor Equipment Industry Group Domestic Float Price Return Index was off 1.06 percent on Monday in late New York trade.
Rolling power blackouts are set to hit Tokyo and surrounding areas over coming weeks, adding to the challenge of inspecting and repairing northern Japan manufacturing plants. Aftershocks and radiation leaks from damaged nuclear power plants also threaten production in the region.
Companies and analysts said it was too early to gauge how long the problems would last. Power supply is a critical issue along with transportation. Ports handling as much as 7 percent of Japan's industrial output sustained major damage from the quake, with most seen out of operation for months.
Toyota said it plans to halt production at all its 12 Japanese plants in Japan through Wednesday to support relief efforts. The move would reduce output by 40,000 vehicles.
"Not only is the struck region one of our production bases, those directly hit and vastly affected include our dealers, suppliers and numerous other partners," Toyota President Akio Toyoda said in a statement on Monday.
Toyota had previously stopped work at four plants that make the Yaris small car and some Scion vehicles, and evacuated workers to safer areas. It also said it is looking at how its suppliers and dealers fared.
Honda Motor Co said it would suspend production at its Japanese plants at least until March 20, and it was closely monitoring the supply of parts to its southern England plant in Swindon.
In France, Nissan Motor Chief Executive Carlos Ghosn said he hoped the company's Japanese factories could start up again in 2-3 days. PSA Peugeot Citroen halted production of its iOn and C-Zero electric cars, which are based on Mitsubishi's iMiEV.
The big U.S. auto companies General Motors Co and Ford Motor Co said they had seen no parts disruptions yet, but were in close contact with suppliers.
"I'm looking at it as mostly a temporary issue for the industry," Standard & Poor's analyst Efraim Levy said. "The question that no one can answer is what the duration will ultimately be.
"It seems to be the automakers' plants themselves are in OK condition, but some suppliers have issues that stop production of a whole vehicle line of a certain car or a certain truck," he added.
KOREAN COMPANIES HIT
South Korean companies, which depend heavily on Japan for LCD glass, chip equipment, silicon wafers and other materials to make semiconductors, are likely to be some of the worst hit.
Hynix Semiconductor, the world's No.2 memory chipmaker and a rival of Japan's quake-affected Toshiba Corp and Elpida Memory, said it was concerned the quake may weaken consumer demand and disrupt supplies.
"It could give a boost to battered chip prices but that's a short-term impact from disrupted supplies by Japanese companies," said Kim Min-chul, chief financial officer at Hynix.
"We are more concerned about the quake reducing overall consumer demand and disrupting supplies of chip components and equipment, which could interrupt our production as well."
Dutch electronic chip-making equipment group ASML said it sources some components from Japanese firms including lasers which are used in some of its scanners.
But it can call on other manufacturers if supplies are disrupted, ASML spokesman Lucas van Grinsven told Reuters.
ASML is in contact with suppliers in Japan to assess the possible impact, said van Grinsven, but said that components sourced from Japan are a fraction of its total supply base.
Its semiconductor-making equipment is designed to shut down automatically if it senses an earthquake, for plants built in earthquake-prone regions in Japan, Taiwan and California, he said.
Toshiba, which supplies more than a third of the NAND memory chips used worldwide in devices such as Apple's iPad, said it was restarting a chip factory in Iwate, northern Japan.
The disaster also led to a rise in spot prices in China for DRAM chips, mostly used in personal computers, said chip price tracker DRAMeXchange.
The world's largest mobile phone maker, Nokia, said it was investigating supplies. About 12 percent of its components are sourced in yen, but Japanese components are likely to represent a larger share due to a recent renegotiation of supply contracts.
Japanese steelmakers halted production at some plants, a possible problem for South Korean shipbuilders since Japan exports 40 percent of its steel.
South Korea has the world's top three shipbuilders -- Hyundai Heavy Industries, Daewoo Shipbuilding and Marine and Samsung Heavy Industries.
The earthquake also raised risks of lower production from Japanese manufacturers of polysilicon and wafers -- materials found in solar panels that convert sunlight into electricity.
Credit Suisse expects supply problems at solar wafer maker M. Setek Co, a unit of AU Optronics, whose plant is situated near Sendai town, close to the epicenter of the quake. AU said initial assessment showed no major damage but it was unclear when production would resume.
U.S. solar panel maker SunPower Corp could be vulnerable to wafer supply disruption because it relies on M. Setek for up to 20 percent of its supplies, Credit Suisse said. Still, its stock rose in U.S. trading along with the whole sector on optimism that solar would gain favor as questions swirl about the future of nuclear power.
Meanwhile Taiwan's TSMC, the world's largest contract maker of semiconductors, said there was no immediate threat to supplies and it had enough raw wafers, gases and chemicals and spare parts to keep running for at least 30 days.
(Additional reporting by Hyunjoo Jin and Ju-min Park in Seoul, Tarmo Virki in Helsinki, Gilles Guillaume and Helen Massy-Beresford in Paris, Rhys Jones in London, Roberta B. Cowan in Amsterdam and Leonora Walet in Hong Kong; Writing by Lincoln Feast and Alexander Smith; Editing by Anshuman Daga, Andrew Callus and Tim Dobbyn)
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